Budget Cuts Will Take a Big Chunk Out of World Economy Next Year

Financial markets are fixated on how the world’s central banks will adjust monetary policy as they grapple with inflation. But it’s fiscal tightening -- the withdrawal of pandemic spending -- that will likely have more impact on the global economy next year.

Public programs to support households and businesses have been the most powerful engine of recovery from the Covid slump -- and now governments are hitting the brakes. The money they’ll pull out of their economies in 2022 amounts to some 2.5 percentage points of the world’s gross domestic product, five times bigger than anything that happened during the ...